How to Read the Put/Call Ratio (Options)
The options put/call ratio is a classic gauge of market sentiment: more puts than calls usually means more caution.
What is the P/C ratio?
P/C = puts ÷ calls. You can use volume or open interest (OI). The OI version better reflects directional positioning and is more stable than volume.
How to read the level
- P/C < 0.7 — calls dominate; bullish-leaning.
- 0.7–1.3 — relatively balanced.
- P/C > 1.3 — puts dominate; bearish-leaning (extremes can be contrarian).
Using it better
- Per stock, not just the index — a stock's own P/C reflects positioning in it.
- Cross-check with order flow — bullish flow + high P/C may be hedging, not bearishness.
- Watch the speed of change — a fast rise is a stronger signal.
Example (data only): "P/C (OI) 0.55 with institutional net buying" — sentiment bullish and flow aligned; a bullish-leaning, flow-consistent feature.
Common mistakes
- Treating option volume as directional positioning.
- Ignoring market-maker and hedging flow.
- Reading one number in isolation without price and order flow.
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This article is for educational and informational purposes only. It presents market data and does not constitute investment advice.